SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Mark One
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
[X ] THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
[ ] THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-17263
CHAMPIONS SPORTS, INC.
----------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1401755
---------------------------------
(State or other jurisdiction of (I.R.S. Employer
organization) Identification No.)
Suite 101, 2500 Wilson Blvd., Arlington VA 22201
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(Address of principal executive offices)
(Zip code)
(703) 526-0400
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
As of July 14,1998, the Registrant had a total of 8,500,638 shares of
common stock outstanding.
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CHAMPIONS SPORTS, Inc.
FORM 10-QSB
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
July 31, 1998 (unaudited) and
April 30, 1998 3
Consolidated Statements of Operations:
Three months ended
July 31, 1998, and July 31, 1997,
(unaudited) 4
Consolidated Statements of Cash Flows:
Three months ended July 31, 1998, and
July 31,1997 (unaudited) 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussions and
Analysis of Financial Condition
and Results of Operations 7
Part II. Other Information and Signatures
Item 4. Submission of Matters to a Vote
of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
2
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<TABLE>
<CAPTION>
Champions Sports, Inc. and Subsidiaries
Consolidated Balance Sheets
JULY 31 APRIL 30
1998 1998
---- ----
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $677,660 $631,230
Certificate of deposit -
Accounts receivable - trade 650 612
Inventories 51,402 69,594
Prepaid expenses 11,995 3,850
Deferred tax asset 207,952 207,952
------- -------
Total current assets 949,659 913,238
Property and Equipment
Furniture and Equipment 530,531 530,531
Leasehold improvements 570,962 570,962
1,101,494 1,101,493
Accumulated depreciation and amortization (713,924) (700,356)
-------- --------
387,570 401,137
Other assets
Deposits 13,065 13,065
------ ------
Total assets $1,350,294 $1,327,440
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $49,642 $42,672
Dividend payable on preferred stock 269,160 269,160
Notes payable 0 0
Deferred revenue 0 0
Other accrued expenses 41,518 48,038
Deposits 13,065 13,065
Current portion of deferred lease concession 4,363 4,363
----- -----
Total current liabilities 364,683 364,233
Deferred lease concession (excluding current portion) 24,281 24,644
Note payable, excluding current portion
Commitments and contingencies
Stockholders' equity
Preferred stock:
Series A, 12% convertible cumulative,
par value $10 per share,
preferred as to dividends and liquidation:
650,000 shares authorized 56,075 issued
and outstanding. 560,752 560,752
Undesignated, par value $10 per share, 150,000
authorized and unissued. 0 0
Common stock, par value $.001 per share,
50,000,000 shares authorized, 8,500,638
shares issued and outstanding at
July 31 and April 30, 1996 8,501 8,501
Additional paid-in capital 5,308,112 5,308,112
Accumulated deficit (4,916,035) (4,938,802)
---------- ----------
Total stockholders' equity 961,330 938,563
Total liabilities and stockholders' equity $1,350,294 $1,327,440
========== ==========
See notes to consolidated financial statements
</TABLE>
3
<PAGE>
CHAMPIONS SPORTS, INC.
Consolidated Statement of Operations
(Unaudited)
Three months
ended July 31,
1998 1997
----------------
Revenue
Food and beverage sales $457,512 $437,430
Merchandise and memorabilia 83,584 5,079
Licensing fees - 130,740
Interest income 6,111 1,016
Other income 8,235 6,873
----- -----
$555,443 $581,138
Expense
Cost of food and beverage sales 123,513 120,989
Cost of merchandise and memorabilia sales 24,686 4,109
Restaurant payroll and related costs 150,743 150,916
Restaurant occupancy costs 52,494 50,657
Other restaurant costs 90,987 85,578
General and administrative 76,686 114,048
Depreciation and amortization 13,567 13,567
Interest expense - 371
------ ---
532,676 540,236
Net Income $22,767 $40,902
======= =======
Less preferred stock dividends 16,800 16,800
Net income available to common share holders $5,967 $24,102
====== =======
Basic earnings per share $0.00 $0.00
Earnings per common share - assuming full dilution $0.00 $0.00
See notes to consolidated financial statements
4
<PAGE>
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
For the three months ended July 31,
1998 1997
---- ----
Cash flows from operating activities:
Net income $22,767 $40,902
Adjustments to reconcile net income
to cash provided by (used ) by operating activities:
Depreciation and amortization 13,567 13,567
Changes in asset and liabilities
Accounts receivable (38) (123,402)
Inventories 18,191 (10,471)
Prepaid expenses (8,145) 511
Accounts payable 6,971 2,153
Deferred revenue
Other accrued expenses (6,520) (1,621)
Deferred lease concessions (363) (1,090)
---- ------
Net cash provided (used) by operating activities 46,430 (79,451)
Cash flows from investing activities:
Purchase of certifcate of deposit
Purchase of property and equipment (10,749)
-------
Net cash provided by investing activities (10,749)
Cash flows from financing activities:
Repayment of borrowings (7,129)
------
Net cash provided (used) by financing activities (7,129)
Net increase (decrease) in cash and cash equivalents 46,430 (97,329)
Cash and cash equivalents at beginning of year 631,230 244,961
Cash and cash equivalents at July 31 677,660 147,632
5
<PAGE>
CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
July 31, 1998
Summarized Financial Information
Company or group of companies for which report is filed:
CHAMPIONS Sports, Inc. and Subsidiaries
The consolidated balance sheet as of July 31, 1998, the consolidated statements
of operations and the consolidated statements of cash flows for the three months
ended July 31, 1998 and July 31,1997 have been prepared by the company, without
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and changes in cash flow at July 31, 1998 and for all
periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these consolidated financial statements
be read in conjunction with the financial statements and notes thereto included
in the Company's 10-KSB as of April 30, 1998. The results of operations for the
period ended July 31, 1998 are not necessarily indicative of the operating
results for the full year.
6
<PAGE>
Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operation
For the three month period ended July 31, 1998, the Company's net
income was $22,767, net income available to common shareholders was $5,967
($0.00 per common share) versus net income of $40,902 and net income available
to common shareholders of $24,102 ($0.00 per common share). The Company's assets
increased to $1,350,294 at July 31, 1998 from $1,327,440 at April 30, 1998.
Revenues
The Company's total revenues were $555,443 for the three months ended
July 31, 1998 versus $581,138 for the three month period ended July 31, 1998, a
decrease of $25,695 or 4.42%. By component, food and beverage sales increased
4.6% from the previous year for the three months ended July 31, 1998. This
increase in food and beverage sales is attributed to a increase in customer
volume as there were no material price increases for menu items. Merchandise
sales for the three months ended July 31, 1998 were $83,584 compared to $5,079
during the comparable period in the prior year. This increase is attributed to
the Company providing memorabilia to one Marriott Champions location during the
quarter. For the three months ended July 31, 1997, the Company recorded
licensing fees of $130,740. In November 1997, the Company sold the Champions
brand and trademark to Marriott International and no longer receives licensing
fees. Interest income was 1.1% of the Company's total revenue for the period
ended July 31, 1998 compared to less than 1% in the comparable period in 1997.
Other income represented 1.5% and 1.2% of the company's total revenue for the
three months ended July 31, 1998 and 1997.
Expenses
Cost of food and beverage was 27.0% of related sales for the three
months ended July 31, 1998 compared to 27.7% for the three months ended July 31,
1997. Cost of merchandise and memorabilia sales for the nine months ended July
31, 1998 was $24,686 compared to $4,109 in the preceding year. Restaurant
payroll and related costs were 32.9% of related food and beverage sales for the
three months ended July 31, 1997 and 34.5% for the three months ended July 31,
1997. Restaurant occupancy costs remained constant at 11.5 % of food and
beverage sales for both comparable periods. Other restaurant costs also remained
constant during both periods at approximately 20% of food and beverage sales.
General and administrative expense for the Company's corporate office was
$76,686 for the three months ended July 31, 1998 compared to $114,048 for the
three months ended July 31, 1997. Depreciation and amortization expense remained
constant at $13,567 during the three months ended July 31, 1998 and 1997.
Liquidity and Capital Resources
The Company's cash position on July 31, 1998 was $677,660 compared to
$631,230 on April 30, 1998, an increase of $46,430. For the three months ended
July 31, 1998, the Company operating activities provided $46,430 in cash. During
the three months ended July 31, 1998, the Company did not use any funds for
investing. During the three months ended July 31, 1997, the Company's operations
used $79,451 in cash, purchased equipment for $10,749 and repaid debt of $7,129.
Company met its cash needs during the three months ended July 31, 1998 and 1997
from its revenues and from cash flow from its San Antonio, Texas operation.
7
<PAGE>
The Company's working capital was $584,976 on July 31 1998 and $549,005
on April 30, 1998.
Stockholder's equity was $961,330 as of July 31, 1998 compared to
$938,563 as of April 30, 1998.
The Company is actively pursuing merger/acquisition candidates. There
is no assurance that the Company will be able to structure a merger or
acquisition on terms satisfactory to the Company.
Other
This document contains "forward-looking statements" (within the meaning
of the Private Securities Litigation Act of 1995) that inherently involve risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of unforeseen
external factors. These factors may include, but are not limited to, changes in
general economic conditions, customer acceptance of products offered and other
general competitive factors.
YEAR 2000
The Company has taken appropriate measures by purchasing software and
computer equipment that is compliant with identifying the year 2000. However,
the Company relies on outside vendors and financial institutions for other
service and there is no assurance that these vendors and financial institutions
will be able to meet the year 2000 requirements.
8
<PAGE>
Part II. Other Information
Item 4. Submission of Matters to A Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
None.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
CHAMPIONS Sports, Inc.
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James Martell
Chairman, President and
Chief Executive Officer
-------------------------
James E. McCollam
Corporate Secretary, Chief Accounting
Officer and Controller
September 14, 1998
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> JUL-31-1998
<CASH> 677,660
<SECURITIES> 0
<RECEIVABLES> 650
<ALLOWANCES> 0
<INVENTORY> 51,402
<CURRENT-ASSETS> 949,659
<PP&E> 1,101,494
<DEPRECIATION> (713,924)
<TOTAL-ASSETS> 1,350,294
<CURRENT-LIABILITIES> 364,683
<BONDS> 0
560,752
0
<COMMON> 8,501
<OTHER-SE> (4,916,330)
<TOTAL-LIABILITY-AND-EQUITY> 1,350,294
<SALES> 541,096
<TOTAL-REVENUES> 555,443
<CGS> 148,199
<TOTAL-COSTS> 442,423
<OTHER-EXPENSES> 76,686
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 22,767
<INCOME-TAX> 0
<INCOME-CONTINUING> 22,767
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,767
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
